Corporate Governance Report

Transcription

1 Corporate Governance Report Report in line with the requirements of the stock exchanges under clause 49 of the Listing Agreement, on the practices followed by the company and other voluntary compliances is furnished below : 1. COMPANY S PHILOSOPHY ON CORPORATE GOVERNANCE Corporate Governance is the set of processes, customs, policies, laws and institutions affecting the way a company is directed, administered or controlled. It is a system of structuring, operating and controlling a company with a view to achieve long term strategic goals to satisfy shareholders, creditors, employees, customers and suppliers. Corporate governance is based on principles such as conducting the business with all integrity and fairness, being transparent with regard to all transactions, making all the necessary disclosures and decisions, complying with all the laws of the land, accountability and responsibility towards the stakeholders and commitment to conducting business in an ethical manner. Your Company adheres to the principles of corporate governance and commits itself to accountability and fiduciary duty in the implementation of guidelines and mechanisms to ensure its corporate responsibility to the members and other stakeholders. 2. BOARD OF DIRECTORS 2.1 Composition The Company has an Executive Chairman. The Board comprises of eight directors, four of whom are Executive and remaining are non-executive independent directors, which is in conformity with clause 49 of the listing agreement. The category of directors as on 31 st March 2014 is as follows : Name of the Director Status / Designation Category Dr. Murali K. Divi Chairman Promoter and Managing Director and Executive Director Sri. N. V. Ramana Executive Director Executive Director Sri. Madhusudana Rao Divi Director - Projects Executive Director Sri. Kiran S. Divi Director & Executive Director President - Operations Dr. K. Satyanarayana* Director Non-executive Independent Director Sri. S. Vasudev* Director Non-executive Independent Director Dr. G. Suresh Kumar Director Non-executive Independent Director Sri. R. Ranga Rao Director Non-executive Independent Director *Resigned w.e.f Note : Sri. K.V.K. Seshavataram and Smt. S. Sridevi have been appointed as additional directors w.e.f Board Procedures The Board of Directors is the highest governance body constituted to oversee the Company s overall functioning. The responsibility of Board is to provide strategic guidance to the company, to ensure effective monitoring of the management and to be accountable to the company and the shareholders. The Company Secretary, in consultation with the Chairman and Managing Director, prepares the agenda for the meeting and circulates the same along with relevant enclosures to the Board members sufficiently in advance of the meeting. Information and data that are more important to the Board s understanding of the business in general and related matters are tabled for discussion. The meetings of the Board of Directors are generally held at Company s Registered Office at Hyderabad, and are scheduled well in advance. In case of business exigencies or urgency of matters, resolutions are passed by circulation. 12

2 Information required to be placed before Board, inter alia, include : Annual operating plans and budgets including capital budgets and any updates. Quarterly results for the company and its operating divisions or business segments. Minutes of meetings of audit committee and other committees of the board. The information on recruitment and remuneration of senior officers just below the board level, including appointment or removal of Chief Financial Officer and the Company Secretary. Show cause, demand, prosecution notices and penalty notices which are materially important. Fatal or serious accidents, dangerous occurrences, any material effluent or pollution problems. Any material default in financial obligations to and by the company, or substantial nonpayment for goods sold by the company. Any issue, which involves possible public or product liability claims of substantial nature, including any judgement or order which, may have passed strictures on the conduct of the company or taken an adverse view regarding another enterprise that can have negative implications on the company. Details of any joint venture or collaboration agreements. Transactions that involve substantial payment towards goodwill, brand equity, or intellectual property. Significant labour problems and their proposed solutions. Any significant development in Human Resources/ Industrial Relations front like signing of wage agreement, implementation of Voluntary Retirement Scheme etc. Sale of material nature, of investments, subsidiaries, assets, which is not in normal course of business. Quarterly details of foreign exchange exposures and the steps taken by management to limit the risks of adverse exchange rate movement, if material. Non-compliance of any regulatory, statutory or listing requirements and shareholders service such as nonpayment of dividend, delay in share transfer etc. 2.3 Number & Dates of Board Meetings held during the year The Board meets in executive session at least four times in a year at quarterly intervals and more frequently if deemed necessary, to transact its business. During the financial year the Board has met four times, i.e. on 20 th May 2013, 3 rd August 2013, 8 th November 2013 and 3 rd February Director s attendance at the Board and General Meetings held during the financial year and number of other Directorships and Chairmanship/ Membership of Committees of each Director in various companies is as follows : Name of the Director *Resigned w.e.f **Resigned w.e.f Attendance Particulars No. of Board Meetings No. of Directorships and Committee member / chairmanship in other Companies Committee Chairmanships Last AGM Directorships Committee Memberships Held Attended Dr. Murali K. Divi 4 4 Yes Sri. N. V. Ramana 4 4 Yes Sri. Madhusudana Rao Divi 4 4 Yes Sri. Kiran S. Divi 4 3 Yes Dr. K. Satyanarayana** 4 3 Yes Sri. S. Vasudev** 4 3 No Prof. C. Ayyanna* 4 1 No Dr. G. Suresh Kumar 4 4 Yes Sri. R. Ranga Rao 4 3 No No Director holds membership of more than 10 committees of Boards nor is a Chairman of more than 5 Committees of Boards of all the companies in which he is a Director. 13

3 Brief profile of the directors seeking appointment / re-appointment at this Annual General Meeting : Dr. Murali K. Divi (DIN: ) Dr. Divi holds a post graduate degree in Pharmaceutical Sciences from College of Pharmacy, Manipal, Karnataka and a doctorate degree in Pharmaceutical Sciences from Kakatiya University, Warangal, Telangana. He is a member of American Institute of Chemical Engineers, American Chemical Society, American Cosmetic Society and American Pharmaceutical Association. He has an extensive experience of over 30 years in the Active pharmaceutical ingredients industry. Dr. Divi joined the Board in He has considerable expertise in implementing and managing bulk fine chemical manufacturing facilities conforming to GMP/ US-FDA standards. He has led R&D teams and developed efficient processes for speciality chemicals, pharmaceutical intermediates, herbicides and rodenticides and custom synthesis. Directorships held in other companies Divi s Biotech Private Limited Divi s Pharmaceuticals Private Limited Divi s Resorts Private Limited Pridhvi Asset Reconstruction and Securitisation Co. Limited Divi s Properties Private Limited Divis Laboratories (USA) Inc., Touchstone Equities Limited Memberships/ Chairmanships of committees in other companies Member of Executive Committee of Pridhvi Asset Reconstruction and Securitisation Co. Limited. Shareholding in the company He is Promoter of the Company and holds 77,83,500 equity shares of the Company as on March 31, Mr. N. V. Ramana (DIN: ) Mr. Ramana is a graduate in chemistry from Osmania University, Hyderabad and is a Member of American Chemical Society. He joined the company in 1994 and since , he is a Whole-time Director designated as Executive Director on the Board of the Company. Mr. Ramana has over 25 years of experience in Pharmaceutical Industry and handled all the varied functions in the active pharmaceutical ingredients industry including Custom Manufacturing and Contract research. Directorships held in other companies Divi s Pharmaceuticals Private Limited Divis Laboratories (USA) Inc., Memberships/ Chairmanships of committees in other companies He is neither a Member nor Chairman of Committees of other Companies. Shareholding in the company He holds 6,56,470 equity shares of the Company as on March 31, Mr. Kiran S. Divi (DIN: ) Mr. Kiran S. Divi holds a post graduate degree in Pharmacy from Jawaharlal Nehru Technological University (JNTU), Kakinada, Andhra Pradesh. He joined the company in 2001 and since he is a Whole-time Director designated as Director & President - Operations on the Board of the Company. 14

4 He was involved in understanding the markets in USA in respect of active Pharma ingredients and intermediates for about two years before joining the Board. He is responsible for marketing the company s generic products in the USA, which is considered an important value market for the Pharma ingredients. Directorships held in other companies Divi s Biotech Private Limited Divi s Resorts Private Limited Divi s Properties Private Limited Memberships/ Chairmanships of Committees in other companies He is neither a Member nor Chairman of Committees of other Companies. Shareholding in the company He holds 2,30,00,000 equity shares of the Company as on March 31, Dr. G. Suresh Kumar (DIN: ) Dr. G Suresh Kumar holds an MBBS degree from Gandhi Medical College, Hyderabad and M.S. (General Surgery) from Gulbarga University, Karnataka. He worked with the Ministry of Health, Government of Algeria between 1978 and He is a practicing Consultant Surgeon at several multispecialty hospitals at Hyderabad. Dr. Suresh Kumar joined the company as Director on Directorships held in other companies He is not a director of any other company Memberships/ Chairmanships of Committees in other companies He is neither a Member nor Chairman of Committees of other Companies. Shareholding in the company He is not holding any equity shares of the Company as on March 31, Mr. R. Ranga Rao (DIN: ) Mr. R. Ranga Rao holds a Post-graduate degree in Pharmacy from College of Pharmacy, Manipal, Karnataka. He started his career as an Analyst in a Pharma unit at Vijayawada. In 1978, he joined the State Government service in the Drugs Control Department. He worked at different levels and retired as Director, Drugs Control Administration, Govt. of Andhra Pradesh in the year He also served as a member of different committees formed by Director General, Drugs Controller, Govt. of India to assist the department for the betterment of availability of safe and quality drugs to the public. He also served as a President, Indian Pharmaceutical Association, AP State Branch for two years. Mr. R. Ranga Rao joined the company as Director on Directorships held in other companies He is not a director of any other company Memberships/ Chairmanships of Committees in other companies He is neither a Member nor Chairman of Committees of other Companies. Shareholding in the company He is not holding any equity shares of the Company as on March 31, Mr. K.V.K. Seshavataram (DIN: ) Mr. K.V.K. Seshavataram is a qualified Chartered Accountant, Cost Accountant and Company Secretary and is a member of the Institute of Chartered Accountants of India, the Institute of Cost Accountants of India and the Institute of Company Secretaries of India. He retired as Chairman and Managing Director of M/s. Hindustan Zinc Ltd., 15

5 Mr. Seshavataram has a varied experience of over 35 years in financial and general management, both in the private and public sector. Mr. Seshavataram was inducted into the company s Board as an Additional Director on Directorships held in other companies He is not a director of any other company Memberships/ Chairmanships of Committees in other companies He is neither a Member nor Chairman of Committees of other Companies. Shareholding in the company He is not holding any equity shares of the Company as on March 31, Mrs. S. Sridevi (DIN: ) Mrs. S. Sridevi holds a Masters degree in Nutrition from Sri Venkateswara University, Tirpuati, Andhra Pradesh. She has worked as Senior Manager with Andhra Bank and has diverse knowledge of the corporate finance and banking. Mrs. S. Sridevi was inducted into the company s Board as an Additional Director on Directorships held in other companies She is not a director of any other company Memberships/ Chairmanships of Committees in other companies She is neither a Member nor Chairman of Committees of other Companies. Shareholding in the company She holds 10,000 equity shares of the Company as on March 31, COMMITTEES OF BOARD a) Audit Committee The primary objective of the Audit Committee of the company is to monitor and provide effective supervision of the management s financial reporting process with a view to ensure accurate, timely and proper disclosures and transparency, integrity and quality of financial reporting. The Committee comprising of three Independent Directors, met four times during the year, i.e. on 20 th May 2013, 3 rd August 2013, 8 th November 2013 and 3 rd February Name Designation Held No. of Meetings Attended Sri. S. Vasudev* Chairman 4 3 Dr. G. Suresh Kumar Member 4 4 Sri. R. Ranga Rao Member 4 3 *Mr. S. Vasudev Chairman of the Committee resigned as Director from and Mr. K.V.K. Seshavataram, who was appointed as additional director by the Board w.e.f , has been appointed as Chairman of the Audit Committee in place of Mr. S. Vasudev. The Company Secretary acts as Secretary to the Committee. The meetings of the Audit Committee were also attended by the Executive Director, the Chief Financial Officer, internal auditor and representatives of Statutory Auditors of the Company. The constitution, terms of reference, role and scope are in line with those prescribed by Clause 49 of the Listing Agreement with the stock exchanges read with Section 177 of the Companies Act, Role of Audit Committee includes the following : 1. Oversight of the company s financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible; 2. Recommendation for appointment, remuneration and terms of appointment of auditors of the company; 16

6 3. Approval of payment to statutory auditors for any other services rendered by the statutory auditors; 4. Reviewing, with the management, the annual financial statements and auditor s report thereon before submission to the board for approval, with particular reference to: a. Matters required to be included in the Director s Responsibility Statement to be included in the Board s report in terms of clause (c) of sub-section 3 of section 134 of the Companies Act, 2013 b. Changes, if any, in accounting policies and practices and reasons for the same c. Major accounting entries involving estimates based on the exercise of judgment by management d. Significant adjustments made in the financial statements arising out of audit findings e. Compliance with listing and other legal requirements relating to financial statements f. Disclosure of any related party transactions g. Qualifications in the draft audit report 5. Reviewing, with the management, the quarterly financial statements before submission to the board for approval; 6. Reviewing, with the management, the statement of uses / application of funds raised through an issue (public issue, rights issue, preferential issue, etc.), the statement of funds utilized for purposes other than those stated in the offer document / prospectus / notice and the report submitted by the monitoring agency monitoring the utilisation of proceeds of a public or rights issue, and making appropriate recommendations to the Board to take up steps in this matter; 7. Review and monitor the auditor s independence and performance, and effectiveness of audit process; 8. Approval or any subsequent modification of transactions of the company with related parties; 9. Scrutiny of inter-corporate loans and investments; 10. Valuation of undertakings or assets of the company, wherever it is necessary; 11. Evaluation of internal financial controls and risk management systems; 12. Reviewing, with the management, performance of statutory and internal auditors, adequacy of the internal control systems; 13. Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit; 14. Discussion with internal auditors of any significant findings and follow up there on; 15. Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the board; 16. Discussion with statutory auditors before the audit commences, about the nature and scope of audit as well as post-audit discussion to ascertain any area of concern; 17. To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case of non-payment of declared dividends) and creditors; 18. To review the functioning of the Whistle Blower mechanism; 19. Approval of appointment of CFO (i.e., the whole-time Finance Director or any other person heading the finance function or discharging that function) after assessing the qualifications, experience and background, etc. of the candidate; 20. Carrying out such other functions as may be specifically referred to the Committee by the Company s Board of Directors and/or other Committees of Directors. 21. Reviewing the following information : 1. Management discussion and analysis of financial condition and results of operations; 17

7 2. Statement of significant related party transactions (as defined by the Audit Committee), submitted by management; 3. Management letters / letters of internal control weaknesses issued by the statutory auditors; 4. Internal audit reports relating to internal control weaknesses; and 5. The appointment, removal and terms of remuneration of the Chief internal auditor shall be subject to review by the Audit Committee. b) Compensation, Nomination and Remuneration Committee The Remuneration and Compensation Committee was re-designated as Compensation, Nomination and Remuneration Committee by the Board on May 24, 2014 in line with the requirements of provisions of the Companies Act, 2013, Clause 49 of the Listing Agreement and Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, as amended from time to time. Composition of the Committee Name Category Designation Dr. K. Satyanarayana* Independent Director - Sri. S. Vasudev* Independent Director - Dr. G. Suresh Kumar** Independent Director Chairman Sri. R. Ranga Rao Independent Director Member Smt. S. Sridevi** Independent Director Member * Ceased as a member of the committee w.e.f ** Inducted into the committee w.e.f Terms of Reference of the Committee include the following : To formulate the criteria for determining qualifications, positive attributes and independence of a Director, and recommend to the Board a policy, relating to the remuneration for the Directors, key managerial personnel and other employees To formulate the criteria for evaluation of Independent Directors and the Board To devise a policy on Board diversity To identify persons who are qualified to become Directors and who may be appointed in senior management in accordance with the criteria laid down and to recommend to the Board their appointment and/ or removal. To administer, monitor and formulate detailed terms and conditions of the Employees Stock Option Scheme including : the quantum of options to be granted under Employees Stock Option Scheme per employee and in aggregate; the conditions under which option vested in employees may lapse in case of termination of employment for misconduct; the exercise period within which the employee should exercise the option, and that the option would lapse on failure to exercise the option within the exercise period; the specified time period within which the employee shall exercise the vested options in the event of termination or resignation of an employee; the right of an employee to exercise all options vested in him at one time or various points of time within the exercise period; the procedure for making a fair and reasonable adjustment to the number of options and to the exercise price in case of corporate actions, such as rights issues, bonus issues, merger, sale of division and others; the granting, vesting and exercising of options in case of employees who are on long leave; and the procedure for cashless exercise of options To carry out any other function as is mandated by the Board from time to time and / or enforced by any statutory notification, amendment or modification, as may be applicable 18

8 Remuneration and Compensation committee met once during the year on 8 th November 2013 and the attendance of each member of the Committee is as follows : Name Designation Held No. of Meetings Attended Dr. K. Satyanarayana Chairman 1 1 Sri. S. Vasudev Member 1 1 Sri. R. Ranga Rao Member 1 1 Details of Remuneration to Executive Directors (Rs. in lakhs) Name Salary PF Perks Commission Total Dr. Murali K. Divi Sri. N. V. Ramana Sri. D. Madhusudana Rao Sri. Kiran S. Divi Total Non-Executive Directors The Company does not pay any remuneration to Non-Executive Directors except sitting fees and reimbursement of travelling and out of pocket expenses for attending the Board/Committee meetings. The details of sitting fee paid to Non-Executive Directors during the year is as follows : Name of the Non-Executive Director Designation No. Shares Held Sitting fees (Rs. in lakhs) Dr. K. Satyanarayana** Director Sri. S. Vasudev** Director Nil 1.40 Prof. C. Ayyanna* Director Nil 0.20 Dr. G. Suresh Kumar Director Nil 1.60 Sri. R. Ranga Rao Director Nil 1.40 *Resigned w.e.f **Resigned w.e.f Payment of Sitting Fees to the Non-Executive Directors and payment of Salary, Commission and Perquisites to the Whole time Directors are made in accordance with industry norms and subject to the overall ceilings imposed by the Companies Act, 1956 and other applicable statutes, if any. c) Stakeholders Relationship Committee The Stakeholders Relationship Committee was constituted by the Board on May 24, 2014 consequent to the dissolution of the Shareholders /Investors Grievance Committee. The composition and the terms of reference of committee are in line with the requirements of provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement. The Stakeholders Relationship Committee is empowered, inter alia, to review all matters connected with the Company s shares transfers and transmissions and redressal of shareholders / investors complaints like nontransfer of shares, non-receipt of dividend, Annual Report etc. Composition of the Committee Name Category Designation Sri. N.V. Ramana* Executive Director - Dr. G. Suresh Kumar* Independent Director - Smt. S. Sridevi** Independent Director Chairman Sri. K.V. K. Seshavataram** Independent Director Member Sri. L. Kishore Babu Chief Financial Officer Member * Ceased as a member of the committee w.e.f ** Inducted into the committee w.e.f

9 Terms of Reference of the Committee include the following : To redress the grievances of shareholders, debenture holders and other security holders To resolve the grievances of the security holders of the company including complaints related to transfer of shares, non-receipt of annual reports, non-receipt of declared dividends. To approve issue of the Company s duplicate share / debenture certificates To review the performance of the Company s Registrars and Transfer Agents To carry out such other functions as may be referred by the Board from time to time or enforced by any statutory notification / amendment or modification as may be applicable The Stakeholders Relationship Committee consists of two Independent Non-Executive Directors and Chief Financial Officer of the Company. Shareholders / Investors Grievance Committee met once during the year on 11 th October, 2013 and considered rematerialisation of shares and other investor grievances. The attendance of each member of the Committee is as follows : Name Designation Held No. of Meetings Dr. G. Suresh Kumar Chairman 1 1 Sri. N. V. Ramana Member 1 1 Sri. L. Kishore Babu Member 1 1 Attended Ms. P. V. Lakshmi Rajani, Company Secretary is the Compliance Officer of the Company for attending to Complaints / Grievances of the members. Complaints / Grievances received and attended During the year under review, company has received a total of 54 complaints from investors. All were replied / resolved to the satisfaction of the investors and no complaints were outstanding. d) Corporate Social Responsibility Committee As per the Section 135 of the Companies Act, 2013, every company having net worth of Rs. 500 crore or more, or turnover of Rs crore or more or a net profit of Rs.5 crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director. Accordingly, the Corporate Social Responsibility (CSR) Committee was constituted by the Board on March 25, The Committee s responsibility is to assist the Board in undertaking CSR activities by way of formulating and monitoring CSR Policy of the company. Composition of the Committee Name Category Designation Mr. R. Ranga Rao Independent Director Chairman Dr. Murali K. Divi Chairman & Managing Director Member Mr. N. V. Ramana Executive Director Member Mr. Madhusudana Rao Divi Director - Projects Member The brief terms of reference of the Committee are as follows : (a) Formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company; (b) Recommend the amount of expenditure to be incurred on CSR activities and (c) Monitor the implementation of Corporate Social Responsibility Policy of the company from time to time. 20

10 e) Allotment Committee The Allotment Committee oversees the issues relating to allotment of shares under various corporate actions like Mergers, Amalgamations, Preferential Issue, Rights Issue, Bonus Issue etc., No meetings of the commitee were held during the year. Composition of the Committee Name Category Designation Dr. G. Suresh Kumar Independent Director Chairman Mr. R. Ranga Rao Independent Director Member Mr. Kiran S. Divi Director & President - Operations Member The Company Secretary is the Secretary of the Committee. Subsidiaries The Audit Committee reviews the financial statements of the subsidiary companies. During the year, the Board took on record the minutes of the Board meetings of the subsidiary companies. Disclosure on legal proceedings pertaining to shares There are no pending cases pertaining to shares as on CEO and CFO Certification The CEO and CFO of the company have certified to the Board in relation to reviewing financial statements and other information as mentioned in Para V of clause 49 of the listing agreement and the required certificate is appended. Code of ethics and business conduct The Company has adopted the Code of ethics and business conduct for Directors and Senior Management. The code is comprehensive in nature and applicable to all Directors, Executive as well as Non- Executive and to Senior Management of the company. Copy of the said Code is available on the Company s website, The code has been circulated to all the members of the Board and Senior Management and the compliance of the same has been affirmed by them. A declaration signed by the Chairman & Managing Director is as follows : I hereby confirm that the company has obtained from all the members of the board and senior management, affirmation that they have complied with the code of ethics and business conduct for directors and senior management in respect of the financial year For and on behalf of the Board of Directors Hyderabad 23 rd June 2014 Dr. Murali K. Divi Chairman & Managing Director 21

11 4. GENERAL BODY MEETINGS Particulars of last three Annual General Meetings : AGM Year ended Venue Date & Time Special Resolutions passed for 23 rd AM NIL 22 nd KLN Prasad Auditorium, FAPCCI Premises, , Red Hills, Hyderabad AM Appointment of a relative of Director to an office or place of profit U/s st AM NIL SPECIAL RESOLUTIONS THROUGH POSTAL BALLOT The Company sought approval through Postal Ballot dated from the Members for re-appointment of a relative of the Director to hold an office or place of profit u/s 314(1B) of the Companies Act, Mr. V. Bhaskara Rao, Practicing Company Secretary has been appointed as Scrutinizer for conducting Postal Ballot. The results were declared on 5 th May The results of the postal ballot as per the report dated 5 th May, 2014 submitted by Mr. V. Bhaskara Rao, Scrutinizer are as follows : S.No. Particulars Physical Electronic (E-voting) TOTAL 1. Total Postal Ballot Forms received Less: Invalid Postal Ballot Forms 20 Nil Valid Postal Ballot Forms Total No. of valid votes Casted Total No. of votes assented to the resolution Total No. of votes dissented to the resolution Percentage of valid votes casted in favour of 99.98% the resolution 8. Percentage of valid votes casted against the 0.02% resolution 9. Result Passed with requisite majority The Company has complied with the procedures for the Postal Ballot in terms of the Companies (Passing of Resolution by Postal Ballot) Rules, 2011 and amendments thereto. In the ensuing AGM, no business is proposed to be transacted requiring a postal ballot. 22

12 5. DISCLOSURES A) Disclosures on Materially Significant Related Party Transactions The Company does not have any related party transactions, which may have potential conflict with the interest of the Company. Other related party transactions have been reported at item No.29 (II) (12) of other explanatory information. The Register of Contracts containing transactions, in which Directors are interested, is placed before the Board regularly. B) Cases of Non-Compliances / Penalties There has been no instance of non-compliance by the Company on any matter related to capital markets. Hence, the question of imposition of penalties or strictures by SEBI or the Stock Exchanges does not arise. C) Risk Management The company has been addressing various risks impacting the company and the policy of the company on risk management is provided elsewhere in this annual report in Management Discussion and Analysis. D) Whistle Blower Policy To strengthen its policy of corporate transparency, the company has established an innovative and empowering mechanism for employees. Employees can report to the management their concerns about unethical behaviour, actual or suspected fraud or violation of the company s code of conduct or ethics policy. No personnel have been denied access to the Audit Committee. E) Compliance with mandatory requirements and adoption of non mandatory requirements of Clause 49 The Company has complied with all the mandatory requirements of the code of corporate governance as stipulated in clause 49 of the listing agreement with the stock exchanges. Certificates from Mr. V. Bhaskara Rao, Practicing Company Secretary, Dr. Murali K. Divi, Chairman and Managing Director and Mr. L Kishore Babu, Chief Financial Officer, confirming compliance with the conditions of Corporate Governance as stipulated under clause 49 of the Listing Agreement, are annexed. The company has constituted Remuneration committee. A detailed note on compensation / remuneration is provided elsewhere in the report. As on date, the company has not adopted other non-mandatory requirements i.e., half-yearly declaration of financial performance to shareholders, training of board members, mechanism for evaluating non-executive board members. 6. MEANS OF COMMUNICATION Quarterly, half-yearly and annual financial results of the Company are communicated to the Stock Exchanges immediately after the same are considered by the Board and are published in the all India editions of Financial Express and Hyderabad edition of Andhra Prabha. The results, official news releases of the Company and other shareholder information are also made available on the Company s website, i.e. The Annual Report containing, inter alia, Audited Annual Accounts, Consolidated Financial Statements, Directors Report, Auditors Report and other important information is circulated to members and others entitled thereto. The document is also placed on the Company s website and sent to Stock Exchanges. All periodical compliance filings like shareholding pattern, corporate governance report, company announcements, among others are filed electronically on NSE Electronic Application Processing System (NEAPS) and BSE Corporate Compliance & Listing Centre. 7. MANAGEMENT DISCUSSION AND ANALYSIS This information is set out in a separate section included in this annual report. 23

13 8. GENERAL SHAREHOLDER INFORMATION Annual General Meeting Dividend payment date Date : 25 th August 2014 On or before 8 th September 2014 Time : AM Venue Listing on Stock Exchanges KLN Prasad Auditorium, BSE Limited FAPCCI Premises, , Phiroze Jeejeebhoy Towers, Dalal Street, Red Hills, Hyderabad Mumbai National Stock Exchange of India Limited Exchange Plaza, Bandra-Kurla Complex, Bandra (East), Mumbai Financial Year Stock Code 1 st April 2013 to 31 st March 2014 BSE NSE - DIVISLAB Book Closure Date ISIN No 4 th August 2014 to 8 th August 2014 INE361B01024 Corporate Identity Number (CIN) The CIN allotted to the Company by the Ministry of Corporate Affairs, Government of India is L24110TG1990PLC The Company has paid listing fees for the year to both the above Stock Exchanges. 9. MARKET PRICE DATA Monthly high and low quotations as well as the volume of shares traded at BSE and National Stock Exchanges for the financial year are as follows : Month BSE Limited Low High Volume National Stock Exchange Low High Volume Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

14 Chart given below shows the stock performance at closing prices in comparison to the broad-based index such as BSE Sensex. 10. UNCLAIMED DIVIDEND AMOUNTS Pursuant to the provisions of Section 205A of the Companies Act, 1956, the dividend for the following years, which remain unclaimed for seven years, will be transferred to Investor Education and Protection Fund (IEPF) established by the Central Government pursuant to Section 205C of the Companies Act, Members who have not so far encashed the dividend warrant(s) are requested to seek issue of duplicate dividend warrant(s) in writing to the Company s Registrar and Transfer Agents, M/s. Karvy Computershare Private Limited immediately. Members are requested to note that no claims shall lie against the Company in respect of any amounts which were unclaimed and unpaid for a period of seven years from the dates that they first became due for payment and no payment shall be made in respect of any such claims. Members are also advised to update their correspondence address in their demat accounts in case of their holdings in electronic form or inform their latest correspondence address to the Registrars in case of holdings in physical form. Information in respect of such unclaimed dividends due for transfer to the Investor Education and Protection Fund (IEPF) is as follows : Financial Year 11. SHARE TRANSFER SYSTEM Date of declaration of dividend Amount outstanding as on (Rs. in lakhs) Due for transfer to IEPF on The Stakeholders Relationship Committee approves transfer of shares in physical mode. The Company s RTA transfers the shares within 15 days of receipt of request, subject to documents being valid and complete in all respects. Dematerialization is done within 15 days of receipt of request along with the shares through the Depository Participant of the shareholder. The Stakeholders Relationship Committee will meet as often as required to approve share transfers and for attending to any grievances or complaints received from the members. 25

15 Members may please note that Securities and Exchange Board of India (SEBI) has made it mandatory to furnish PAN particulars for registration of physical share transfer requests. Hence, all members are required to furnish their PAN particulars in the transfer deed while seeking transfer of shares. 12. DISTRIBUTION OF SHAREHOLDING Category No.of Members Total % As on 31st March, 2014 As on 31st March, 2013 No.of Shares Total % No.of Members Total % No.of Shares Total % & above TOTAL (i) SHAREHOLDING PATTERN Category As on As on % to share % to share No. of shares capital No. of shares capital Promoters Mutual Funds and UTI Banks/Financial institutions Foreign Institutional Investors Private Corporate Bodies Indian Public Non-Resident Indians/ Overseas Corporate Bodies Clearing Members Trusts Directors (Not having control over the Company) Grand Total (ii) SHAREHOLDING PROFILE Mode of Holding No. of Holders As on As on No. of shares % to No. of Equity Holders No. of shares % to Equity Demat Physical Total

16 14. DEMATERIALIZATION OF SHARES AND LIQUIDITY The Company s shares have been mandated for compulsory trading in demat form. Valid demat requests received by the Company s Depository Registrar are confirmed within the statutory period. The International Securities Identification Number (ISIN) allotted for the Company by NSDL and CDSL is INE361B In case a member wants his shares to be dematerialized, he may send the shares along with the request through his depository participant (DP) to the Registrars, M/s. Karvy Computershare Private Limited. The Company s Depository Registrars promptly intimate the DPs in the event of any deficiency and the shareholder is also kept abreast. Pending demat requests in the records of the Depositories, if any, are continually reviewed and appropriate action initiated. As on March 31, 2014, % of the shares were in demat mode. 15. Outstanding GDRs/ADRs/warrants or any convertible instruments, conversion date and likely impact on equity We have no GDRs/ADRs or any commercial instrument. 16. PLANT LOCATIONS Choutuppal Unit : Export Oriented Unit : Lingojigudem Village, Chippada Village Choutuppal Mandal Bheemunipatnam Mandal Nalgonda Dist. (TG), Visakhapatnam Dist. (A.P.) Pin Code Pin Code Divi s Pharma SEZ : DSN SEZ Unit : Chippada Village Chippada Village Bheemunipatnam Mandal Bheemunipatnam Mandal Visakhapatnam Dist. (A.P.) Visakhapatnam Dist. (A.P.) Pin Code Pin Code CORRESPONDENCE ADDRESS Depository Registrar and Transfer Agent M/s. Karvy Computershare Private Limited Plot No 17-24, Vittal Rao Nagar, Madhapur, HYDERABAD CIN : U74140TG2003PTC Phone No ; Fax : Toll Free No einward.ris@karvy.com Company Secretary & Compliance Officer Ms. P V Lakshmi Rajani Divi s Laboratories Limited Divi Towers, /E/1/303, Dharam Karan Road, Ameerpet, Hyderabad , INDIA CIN : L24110TG1990PLC Phone : Fax : cs@divislaboratories.com For and on behalf of the Board of Directors Hyderabad 23 rd June 2014 Dr. Murali K. Divi Chairman & Managing Director 27

17 Certificate Certification of Chairman and Managing Director and Chief Financial Officer pursuant to Clause 49 of the Listing Agreement We, Dr. Murali K. Divi, Chairman and Managing Director appointed in terms of the Companies Act, 1956 and Mr. L.Kishore Babu, Chief Financial Officer of the Company to the best of our knowledge and belief, certify that: a. We have reviewed balance sheet and statement of profit and loss (consolidated and unconsolidated) and notes on accounts as well as the cash flow statements and the directors report : i. do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading; ii. together present a true and fair view of the company s affairs and are in compliance with existing accounting standards, applicable laws and regulations. b. There are no transactions entered into by the company during the year which are fraudulent, illegal or violative of the company s code of conduct. c. We accept responsibility for establishing and maintaining internal controls for financial reporting and that we have evaluated the effectiveness of internal control systems of the company pertaining to financial reporting and we have disclosed to the auditors and the Audit Committee, deficiencies in the design or operation of such internal controls, if any, of which we are aware and the steps we have taken or propose to take to rectify these deficiencies. d. We have indicated to the auditors and the Audit committee i. significant changes in internal control over financial reporting during the year; ii. significant changes in accounting policies during the year and that the same have been disclosed in the notes to the financial statements; and iii. instances of significant fraud of which we have become aware and the involvement therein, if any, of the management or an employee having a significant role in the company s internal control system over financial reporting. For Divi s Laboratories Limited Hyderabad Certificate Dr. MURALI K. DIVI Chairman and Managing Director L. KISHORE BABU Chief Financial Officer To The Members of DIVI S LABORATORIES LIMITED We have examined the Compliance of conditions of Corporate Governance by DIVI S LABORATORIES LIMITED (the company), for the year ended 31 st March 2014 as stipulated in clause 49 of the Listing Agreement of the said Company with the Stock Exchanges in India. The Compliance of the conditions of Corporate Governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the company for ensuring the compliance of the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the company. In our opinion and to the best of our information and according to the explanations given to us, we certify that the company has complied with the conditions of Corporate Governance as stipulated in the above mentioned listing agreement. We further state that such compliance is neither an assurance as to the future viability of the Company nor of the efficiency or effectiveness with which the management has conducted the affairs of the Company. For V. BHASKARA RAO & CO., Company Secretaries Hyderabad V. BHASKARA RAO Proprietor F.C.S.No. 5939, C.P.No